Rebidding 3G Bandwidth is a Political Decision

Lam Pun-lee, a local economist, published an article on 10th September, entitled “Four Major Telecom Companies Stop Threatening HK Citizens”. The article emphasised that introducing competition is the best for consumers. However, what is the best approach?

Lam said in his article that, “even though telecom operators in Europe successfully bid 3G licenses at exorbitant prices… their service charge is relatively cheap. In the UK, for example, monthly charge can be as cheap as US$15.” First of all, the majority of the telecom service providers only offer a limited data usage package to consumers, unlike the unlimited data packages that are commonly used in Hong Kong. The only exception is 3 UK, but the speed it offers and its coverage are much less than the ones in Hong Kong. The quality of service 3 UK offers probably costs half the price in Hong Kong. On the other hand, the reason for keen competition in UK’s telecom sector is the large number of Mobile Virtual Network Operator (MVNO), that is small companies renting existing 3G networks to compete with the large players. These small companies are similar to China Mobile (HK): renting the existing 3G bandwidth to service only the lower usage consumers at a much cheaper price. Therefore, the key to opening up the market to encourage competition is how will the government encourage MVNOs.

Hong Kong’s mobile communications market is saturated nowadays. Only five major players survived after multiple number of acquisition. As small companies cannot afford the sky-high bandwidth bidding prices and the initial investment of billions of dollars to build a network, the intense competitions amongst small companies around 15 years ago is no longer seen. If the Hong Kong SAR Government insists on continuing the extremely high bidding price system, the operation cost of telecom companies will surely be high, making it impossible for small companies to enter. If more acquisitions happen, there can be only three out of the current five operators remain. With limited competition, data service cost in Hong Kong will no doubt increases.

How can we resolve this problem? By establishing regulation, demanding large companies who have won the bandwidth bid to lease part of its bandwidth to smaller MVNO operators at a reasonable price. Countries in North Europe with similar population to Hong Kong adopted such practice to encourage competition. South Korea, one of the Asian Tigers, began to encourage MVNO operators since March 2010 in the same manner. Within two years, the number of subscribers at MVNOs has reached two millions. When the world is encouraging competition, Hong Kong must not fall behind. 3G is no longer a new technology. Can this old technology continue to attract new investors by 2016? To encourage competition, the government should immediately start to have new regulation to encourage MVNOs and competition. If the 3G bandwidths rebid ends up having only one player in the market, a monopoly will emerge, just like the TV industry.

Both free-to-air TV and radio channels use public spectra. The source of the problem is not economic related, but political. Some TV and radio channels can sustain long term deficit without closing down, but others who want to enter the market, for example Ricky Wong Wai-kay’s HKTV, cannot get their licenses after a three-year long wait. This shows that China Communist Part controls our freedoms by controlling public spectra. Mobile devices are simply for personal communications, but have become a medium that can replace radio and TV stations. Having a China government official as China Mobile’s owner, there are reasonable grounds for the people of Hong Kong to question if China Mobile wins the bid, will the “real name policy” in China be adopted when using their service for internet access, or even worry that their mobile usage will be monitored.

From both healthy market competitions and politics point of views, to recall 1/3 of the 3G bandwidth for rebid is not beneficial to the people of Hong Kong.